Has there ever been a better time to postpone retirement?
The number of older workers has been on the rise since at least the mid-1990s, according to the Bureau of Labor Statistics. One possible reason: “These workers are not only making more money on average than ever before but are outpacing the average earnings growth of other age groups,” according to a post at the U.S. Census Bureau website.
But rising incomes aren’t the only reason to stay on the job a little longer. Here are several more unexpected benefits of delaying retirement:
1. You get to do meaningful work
Seniority comes with perks. Older workers are more likely to say they get to set their own hours and apply their own ideas to their work, according to research from the nonprofit think tank Rand Corporation.
They’re also more likely to feel their work is useful and satisfying, and less likely to say work is monotonous.
In short, work feels more rewarding for these seniors.
2. You have more social interaction
Work — unless it’s fully remote — provides a built-in social network and an environment where you often have to talk to someone about something.
Maintaining friendships after retirement certainly isn’t impossible, but it’s not automatic, either.
3. You can align with your spouse’s retirement
Having one spouse retire while the other is still working can require compromise along with changes in budgeting, schedules and household responsibilities.
Continuing to work until both are ready for retirement means more time to make plans and set equitable expectations.
4. You have more time to transition
A sudden shift to no longer doing something you’ve done for 40 years or longer is jarring. You need to adjust to a whole new routine, find ways to fill your time and decide what now matters to you.
Many people also wrap up their sense of identity in their jobs. One of the first questions we’re asked when meeting someone new is, “So, what do you do for a living?” Losing that source of identity can be another big adjustment.
Continuing to work, even part time, provides the opportunity to think through these issues and consult retiring peers about the ways they’re navigating the transition.
5. You have fewer retirement years to finance
Working longer means you’re closing your retirement gap in two ways at once. First, you’re reducing the number of years when you will have to finance day-to-day life without work income.
Second, you’re turbo-charging your retirement savings at the time it’s easiest to do so. With any luck, your kids are grown up and hopefully more financially independent, and your earnings are growing faster than those of younger workers.
In addition, you’re allowed to tuck more away for your nest egg. People over age 50 have higher annual retirement contribution limits thanks to what the IRS calls “catch-up contributions.”
6. You can postpone 401(k) withdrawals
You must start drawing down on many types of retirement accounts once you reach the age of 70 ½. These mandatory withdrawals are called “required minimum distributions” or RMD.
As we explained in “Retirees Who Miss This Tax Deadline Could Owe the IRS Thousands,” the rules apply to these types of accounts:
- Traditional individual retirement account (IRA)
- Simplified employee pension plan (SEP IRA)
- Savings incentive match plan for employees (SIMPLE IRA)
- Traditional 401(k)
- Roth 401(k)
However, there is a notable exception on 401(k) plans. If your 401(k) provider allows for it, you can postpone the RMD without penalty until you retire, regardless of age. (But there’s an exception to the exception: “If you own 5 percent or more of the business sponsoring the plan,” you don’t get this break, the IRS says.)
That means more time for your investments to grow, and more time to avoid paying taxes on them.
7. Your Social Security checks will balloon
You can claim Social Security as early as age 62, even if you’re still working. But your monthly benefit will be smaller than if you wait longer to claim it.
If you claim benefits before your full retirement age, you suffer a permanent 30 percent cut to each month’s benefit amount. But every year you wait beyond full retirement age, up to age 70, earns a permanent 8 percent boost in those payments instead.
The reductions are based a formula that’s meant to be actuarially neutral, paying out the same total amount of benefits over the course of your retirement regardless of the age at which you first claim them.
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